HOUSTON – (By Dale King, Realty News Report) – During the latter half of the 20th century, enclosed regional malls prospered by following a straightforward formula: offer a wide variety of stores, ample convenient parking, a food court, some sit-down restaurants, frequent sales and strong ties to the local community.
As the 21st century began, online shopping surged in popularity and has continued to grow to the point that Black Friday and Cyber Monday now compete closely in consumer spending. E-commerce has already contributed to the decline of national retailers such as Kmart, Sears and J.C. Penney, and it now threatens traditional malls unless those centers adapt.
Research by Jones Lang LaSalle (JLL), a major retail property manager, examined 90 super-regional and regional malls that have undergone significant renovations since 2014. More than half of those centers reported renovation budgets, and collectively they’ve invested over $8 billion in upgrading retail spaces and repositioning for future uses.
Several Houston-area centers have evolved to meet changing consumer preferences. While their approaches differ, many reflect the broader trends JLL identified.
JLL categorizes major mall renovations into four main strategies:
- Food and entertainment: Expand or improve dining, beverage and entertainment options to create destination experiences.
- Community integration: Reconfigure space to better serve local needs by adding lifestyle or power-center elements, integrating non-retail uses to form mixed-use developments, dedicating areas for community activities, or creating inviting open spaces.
- Facelifts and rebranding: Improve common areas, upgrade tenant spaces and refresh the center’s identity, including name changes when appropriate.
- New uses: Partially or fully convert retail space to non-retail functions such as offices, medical facilities or residential units.
One notable example in Houston bucks the industry’s struggles. An expansion at the Galleria opened earlier this year: the $250 million Galleria VI wing anchored by Saks, featuring 35 luxury retailers and new dining options not previously available in the market. This expansion reflects Simon Property Group’s broader strategy of investing heavily in its most successful assets to stave off vacancies and attract shoppers.
CBL Properties has taken a different but complementary approach in the Houston market. Stacey Keating, director of public relations and corporate communications at CBL, explained that Pearland Town Center is a 1.1 million-square-foot property featuring apartments, office space and a Courtyard by Marriott hotel positioned above retail. CBL also sold adjacent land to an apartment developer that added a 300-plus-unit complex connected to the center.
Keating said CBL’s strategy focuses on diversifying uses and leaning into entertainment, food and beverage, health and wellness, and beauty categories. Where market conditions support it, the company adds office, medical office, residential or hotel components. Currently, CBL is negotiating with several hotel operators, an apartment developer, a grocer and multiple entertainment concepts totaling over 20,000 square feet.
“As consumer preferences continue to change, people want more than just a place to shop; they seek experiences,” Keating said. “Our goal is to transform properties into vibrant town centers offering a range of uses and experiences.”
CBL, a retail-center REIT based in Chattanooga, Tennessee, sees experiential mixed-use centers as the crucial formula for future success.
“Our properties are not just about retail,” said CBL CEO Stephen Lebovitz. “They serve as gathering places for their communities. We are evolving them by adding food, entertainment, services, fitness and other uses, and we are actively exploring hotels, medical, office, residential and educational components.”
Mixed-use developments are proving successful in the Houston area. A recent Transwestern report noted that mixed-use centers command rising rents and the lowest vacancy rates compared with other shopping center types.
JLL’s research also highlights a performance gap among malls: top-tier centers are significantly more resilient. The highest-performing 81 U.S. malls command average asking rents of $72.44 per square foot—more than 3.5 times the average asking rent of second-tier malls. While a mall’s performance is partly tied to the surrounding neighborhood, improvements in aesthetics and a carefully curated tenant mix can boost foot traffic and increase property value.
In Houston, leading centers such as the Galleria, Baybrook, and The Woodlands Mall—managed by major operators like Simon and General Growth Properties—have successfully evolved and expanded. Other centers, including Northwest Mall, Greenspoint and San Jacinto, have faced long-term declines and continue to explore redevelopment options.
Nov. 27, 2017 Realty News Report Copyright 2017